As food producers suffer, Coles reports more growth

As farmers leave family farms because they can’t make enough money to survive and Australian food manufacturers continue to go bust because they can’t meet supermarket expectations, Coles has recorded a three per cent growth in sales.

Coles’ decision to slash the price of milk to $1 per litre in January 2010 has had enormous impacts on the farming industry, forcing them to sell up to 40 per cent of their milk, which costs 40 cents per litre to produce, at around 18 cents.

"The retail actions are certainly impacting the dairy farmers in a negative way, this combined with the uncertainties and other factors [impacting] dairy or other farming, it's making it unattractive for the next generation, because it's not profitable for my children,” Terry Toohey Australian Dairy Farmers Director, told the recent Food Magazine Industry Leaders Summit.

"If I was old and had children ready to take over the farm, I will tell them blue in the face not to come into agriculture. 

“And that's pretty sad after 107 years on the one farm."

“It’s an unfortunate reality that milk price is a dollar.

“[It’s] simply unsustainable for all involved in the fresh food market.

“You can see the dairy farmers’ dairy families already suffering for Coles’ tactics.

“Tthe sheer size of the supermarket duopoly, over 75 per cent of the market is between the two powers, and they are wielding that [power].”

The power of the supermarkets

Food manufacturers are struggling to stay afloat, as they compete with private label offerings from the supermarkets, which continue to dominate an increasing amount of shelf space, and unrealistic demands placed on them by the big two.

The Senate Inquiry into the supermarket powers struggled to get people to speak publically about the behaviours of Coles and Woolworths, something reporters, including Food Magazine, know all too well.

The Wesfarmers-owned Coles Supermarket group’s three per cent sales growth over the last quarter of the financial year ended 30 June 2012, placed them ahead of arch-rival Woolworths for sales for the twelfth straight quarter.

The real winners of price cuts

Ironically, while the discounting competition between the big two is the factor putting Australian food workers out of jobs and ruining once-viable farming operations, it is exactly this “value” that Wesfarmers managing director Richard Goyder attributed the growth to.

 “Coles achieved total food and liquor sales growth of 4.6 per cent for the year and comparable sales growth of 3.7 per cent,” he said.

“The result was driven by sustained strong volume growth during the year, which accelerated in the fourth quarter as ongoing investments in value, quality and service were positively received by customers.

“This was evidenced by improved customer numbers and increased basket size.”

Managing-director of Coles, Ian McLeod, also weighed in with some out-of-touch comments.

“We have been particularly pleased with the continued strong volume growth,” he said.

“This confirms that our determined efforts to provide better quality, service and value are being welcomed by Australian consumers during a period of sustained pressure on household budgets.”

For thousands of Australians out of work due factory closed as a direct result of the supermarket price wars, the strain on their household budgets has only worsened, and while Coles maintains it has the interest of everyday Australians at heart, it is exactly these people that are being forced out of jobs due to the retailers’ actions.

Is the produce industry next?

Coles also reported that it is improving relationships with local fruit and vegetable producers.

“We also deepened our relationship with Australian Growers by becoming the first Australian supermarket to offer 100 per cent Australian grown Coles branded frozen vegetables,” McLeod said.

Despite such declarations, the Australian produce industry is also suffering at the hands of the big two, and have previously admitted the cut-price fruit and vegetable offerings "has the making" of becoming the next milk price wars.

Do you buy Coles’ declarations that it is just working to deliver cheap prices to Aussie families? Or are you someone who has recently been put out of work by the supermarket powers?

Send this to a friend